Risks, rewards of commission compensation

'Incentivized' pay does work, but can lead to abuses
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Oct 01, 2009

Every practice owner must consider the effects of the pay package. Simply put, some practices will benefit from production-based compensation packages, while others could be injured by them.

I have seen the disappointment that comes when consumers learn their veterinarian is paid a "commission." That's not exactly the James Herriot persona they have come to love.

We all know the train has left the station when it comes to commission pay. And 100 percent commission packages that pay veterinarians a percentage based on their production revenue are becoming more popular. Is it good for our profession? Is it healthy for your practice's mission?

"Incentivized" is the new buzzword in health care — just turn on the news. The government's health-care reform plan brings the issue to the forefront. Rest assured incentivized health care has everything in common with commission pay.

The reality is that incentives do affect human behavior. People are motivated by many things: the work, recognition, learning, benefit packages, lifestyle opportunities, power and, sometimes, just plain old money.

Most of us like a reward equal to the effort applied. The question becomes, what's the best approach to ensure and improve the delivery of quality medical care?

Used-car sales people have a bad reputation because there is the belief that they will do whatever it takes to sell a vehicle — even if it means lying. Unfortunately, that's the image of the "commissioned" worker.

But, that said, incentive pay does work and can be very useful. Go to a fast-food restaurant and watch how the counter personnel upsell, especially when they are offered an extra 5 cents for each cheese slice that is added to a hamburger. Sell more is the mantra, and it is a standard tactic in the business arena to move more product.

We see upselling with cars, gasoline (to premium), electronics, the food industry and all the assorted extended warranties. Obviously, adding a cheese slice to a hamburger is quite different from upselling a pacemaker or inserting a cardiac catheter. But the principles are similar.

So the question that we all must answer is: Does this commission structure lead to procedure recommendations that are not essential? Reports in the human literature are that a significant number of medical procedures clearly are not indicated.

Potential abuses

Incentives work — but they can lead to abuses.

When the incentive is to provide less care, guess what happens?

When the incentive is to offer better patient care, well, that's what happens.

What has come up in the health-care reform debate is that incentives within Medicare call for more and more tests. And as we know, running more tests does not always equal better care.

There are human health-care models that work.

During a recent visit to the Mayo Clinic, we were given a 90-minute appointment. It started on time, and they stayed with us for nearly three hours. No pressure, just the facts. A full menu of options, each with a risk and benefit. A plan of action was set.

There is a reason the Mayo Clinic enjoys an excellent reputation. We can believe that these professionals receive nice compensation packages, and their main priority is to do well for the patient. They have a workplace mandate, environment and resources to accomplish the task.

While incentive programs can be good, they have a dark side.

Here are a few examples:

A practice owner offered the receptionists a $1 incentive for each appointment. The result: The three receptionists wouldn't move from the telephone. Clients weren't getting released, nor were they helping transport patients out to their vehicles. Greeting pets and owners stopped.

If we tracked a 12-year-old dog with geriatric vestibular syndrome, what's the cost of care? My guess is that one clinic might charge $80 and another would deliver a bill of $1,200. Which one has the 100 percent commission compensation package?

Fostering a culture

In the analysis of human behavior, it has been reported that 25 percent is the break point for incentive pay. In other words, when more than 25 percent of a doctor's income is dependent on production, the best interests of the client and patient truly come first.

Consider the impact of continuing education as it relates to incentivized compensation. In recent years at every seminar where I have been a presenter, the attending veterinarians were asked: "Would you give up an hour a day of production to study to develop a new skill?" The answer? No. Why? Loss of revenue.

It takes time to develop skills in internal medicine, surgery or to learn to use an ultrasound. Any competent wellness practitioner needs to be able to complete a screening Shirmer tear test or perform a Schiotz test. Wellness practitioners need to be able to stain an eye to diagnose corneal lesions. But more and more of the routine cases are being sent off to specialists. How are compensation models impacting patient care?

My point? Pay models are a two-way street. Employers want employees to generate the revenue to justify their employment and make a fair living. But when the pendulum swings too far in either direction, there can be negative consequences.

Ulimately, you could be fostering a culture that you didn't intend to create.

Dr. Riegger, dipl. ABVP, is the chief medical officer at Northwest Animal Clinic Hospital and Specialty Practice. Contact him by telephone or fax (505) 898-0407,
, or http://www.northwestanimalclinic.com/. Find him on AVMA's NOAH as the practice management moderator. Order his books "Management for Results" and "More Management for Results" by calling (505) 898-1491.

For a complete list of articles by Dr. Riegger, visit http://dvm360.com/riegger/